May 23, 2018
Vancouver, Canada – Peregrine Diamonds Ltd. (TSX:PGD) (“Peregrine” or the “Company”) is very pleased to announce the positive outcome of an updated independent Preliminary Economic Assessment (“PEA”) for the Chidliak Phase One Diamond Development (“CP1D”) incorporating the 2018 expanded diamond resource at the CH-6 and CH-7 kimberlite pipes on the Company’s 100%-owned Chidliak Diamond Project on Baffin Island, Nunavut, Canada. The updated PEA highlights that the CP1D represents a robust, high margin, open-pit mining project with very attractive economics.
At Chidliak, the Company has discovered 74 kimberlites to date, with eight having been identified as potentially economic through drilling and microdiamond analysis, while other kimberlite pipes require additional work to determine their economic potential. The Company owns all of the diamond marketing and sales rights and there are no non-government royalties or other encumbrances on diamond production.
The updated PEA the Company is announcing today utilizes the expanded Chidliak Inferred Mineral Resource that was announced on February 15, 2018. Highlights of this expanded resource include:
- CH-6 Inferred Mineral Resource of 17.96 million carats in 7.46 million tonnes to 525 metres below surface (“mbs”) at an average grade of 2.41 carats per tonne (“cpt”) or 241 carats per hundred tonnes (“cpht”);
- Inferred Mineral Resource tonnage at CH-6 increased 61% from 4.64 million to 7.46 million tonnes;
- CH-6 contained carats increased by 58% from 11.39 million to 17.96 million carats;
- High-grade KIM-L domain with a grade of 4.49 cpt (449 cpht) now comprises 17% by volume of the updated CH-6 resource; and
- Total Phase One Diamond Development Inferred Mineral Resource at CH-6 and CH-7 now exceeds 22 million carats.
The updated PEA envisages a mine life of approximately 13 years, producing from an open pit at the CH-6 kimberlite pipe for nine years, followed by production via an open pit at the CH-7 kimberlite. The resources at both CH-6 and CH-7 remain open at depth, representing significant expansion opportunities which have not been included in this current economic study.
The PEA was prepared by JDS Energy & Mining Inc. (“JDS”), independent consulting engineers based in Vancouver, Canada. The JDS team has a long history of northern Canadian diamond project experience, including the construction of the Gahcho Kué diamond mine, in the Northwest Territories, Canada.
The Base Case Net Present Value (“NPV”) reported above uses a discount rate of 7.5% and an annual diamond price escalation of 1.75%, down from the 2.5% used in the Company’s 2016 PEA, also prepared by JDS,reflecting current softer rough diamond markets which are currently showing signs of strengthening. With a 2.5% escalation rate consistent with the 2016 PEA base case, the After-tax NPV is $770 million. Table 5 below shows the sensitivity of NPV to the annual diamond price escalation assumption.
Highlights of the 2018 updated Chidliak Phase One Diamond Development PEA base case include:
- Pre-tax NPV(7.5) of $1069 million and a pre-tax Internal Rate of Return (“IRR”) of 38.6%;
- After-tax NPV(7.5) of $679 million and an after-tax IRR of 31.1%;
- Total Life of Mine (“LOM”) pre-tax Free Cash Flow of $2,043 million;
- After-tax payback period of 2.2 years; LOM of 13 years;
- Pre-production capital requirement of approximately $455 million, including $95 million for the access road from Iqaluit and $55 million in contingency;
- Average LOM strip ratio of 6.6:1 (average across the combined CH-6 and CH-7 open pits);
- Mining to a depth of 300 mbs at CH-6; and
- All dollar amounts are in Canadian dollars unless otherwise stated.
A comparison of the 2018 updated PEA and the 2016 PEA base cases is shown in Table 1 below:
Table 1. PEA Outcomes Comparison – 2018 and 2016